In re Seastrom, Case No. 07-41519 (Bankr. W.D.Wash. 1/2/2008), Case No. 07-41519.
| Decision Date | 02 January 2008 |
| Docket Number | Adversary No. 07-4074.,Case No. 07-41519. |
| Court | U.S. Bankruptcy Court — Western District of Washington |
| Parties | In re: DARVID EINAR SEASTROM, Debtor. DARVID EINAR SEASTROM, Plaintiff, v. HUNINGTON D. SEASTROM and MARK F. SEASTROM, individually and the marital community composed thereof, Defendants. |
Trial was held in this matter on December 11, 12, and 17, 2007, on the Complaint to Avoid Fraudulent Conveyance, to Quiet Title, for Damages and Injunctive Relief filed by Darvid Einar Seastrom (Plaintiff) against Hunington D. Seastrom and Mark F. Seastrom, individually and the marital community composed thereof (Defendants). At the conclusion of the trial, the Court took the matter under advisement. This Memorandum Decision shall constitute Findings of Fact and Conclusions of Law as required by Fed. R. Bankr. P. 7052. This is a core proceeding under 28 U.S.C. § 157(b)(2). Based on the evidence, testimony and arguments presented, the Court's findings of fact and conclusions of law are as follows:
I
The Plaintiff is a divorced 65 year old man with two step-children whose sole source of income is social security. On April 8, 2005, the Plaintiff's mother passed away, leaving him as the trustee of a revocable living trust (Trust), under which he and his sister were also the contingent beneficiaries. Pursuant to the terms of the Trust, the Plaintiff inherited significant personal property and the real property (Property) where the Plaintiff and his mother had resided at the time of her death. At the direction of the Plaintiff, on May 31, 2005, a quit claim deed (Trust Deed) was prepared purporting to transfer title from the Trust to the Plaintiff. The Trust Deed, however, misidentified the Plaintiff, both as trustee/grantor and beneficiary, as Darvid R. Seastrom, as opposed to his correct name, Darvid E. Seastrom.
Immediately prior to and after his mother's death, the Plaintiff continued to live on, maintain and improve the Property. The Plaintiff suffers from alcoholism, depression, thyroid problems and the long-term effects of childhood polio. The evidence indicates that by November, 2005, he had spent almost all of the inheritance he had received from his mother through the Trust.
The Plaintiff and his daughter-in-law, Hunington Seastrom, had always enjoyed an especially close relationship, and he had expressed a desire in the past that the Property, which borders a lake, remain in the family. On November 17, 2005, the Plaintiff granted her his Power of Attorney, and on the same day, quit claimed the Property to her as a "gift" (Gift Deed).
The Plaintiff had resided on the Property by himself until November, 2005, when the Defendants relocated from their Tumwater residence and moved in with the Plaintiff. Both the Plaintiff and the Defendants were experiencing financial problems and believed that by residing together they could reduce their expenses. The Defendants' Tumwater residence was subsequently placed on the real estate market for sale.
The relationship between the Plaintiff and the Defendants began to sour while living together, and the Defendants returned to their home in Tumwater in March, 2006. The Plaintiff has remained living on the Property through the date of trial. At the time of the Gift Deed, the Property was free and clear of liens. Within one year, on October 11, 2006, the Defendants borrowed money from the Washington State Employees Credit Union in the amount of $55,000, primarily to pay personal debts, and granted the credit union a first position deed of trust on the Property as security.
The Plaintiff and his step-son, Mark Seastrom, who had not always enjoyed the best of relationships, had a particularly bad altercation in March, 2007, when the Defendants, who were in need of money, requested that the Plaintiff begin paying rent at $500 per month. The Plaintiff retaliated by threatening to take his daughter-in-law off the Gift Deed. She retaliated by giving him a 20-day notice to terminate tenancy on March 30, 2007. Additionally, on May 1, 2007, Ms. Seastrom granted her friend and "godmother," Trisha Swanson, a deed of trust in second position on the Property, securing a $90,000 promissory note. This promissory note was given in consideration of money that Ms. Swanson had given or loaned to the Defendants over the past several years. On May 1, 2007, Ms. Seastrom commenced an unlawful detainer action in the Pierce County Superior Court to remove the Plaintiff from the Property.
On May 11, 2007, the Plaintiff filed for relief under Title 11, Chapter 13, and on May 23, 2007, filed this adversary proceeding. The Plaintiff prays for judgment against the Defendants by requesting that this Court (1) conclude that the original transfer from the Trust to the Plaintiff did not convey title so that the title to the Property remained in the Trust; (2) rule that the Plaintiff retained a life estate in the Property; (3) impose a constructive trust of the Property; (4) rule that Defendant Hunington Seastrom breached a fiduciary duty owed to the Plaintiff under the Power of Attorney; or (5) in the alternative, rule that the quit claim deed is void as a fraudulent conveyance pursuant to 11 U.S.C. § 548(a)(1)(B)(ii)(I) and (III). The Defendants have counterclaimed for damages in an amount not less than the benefit received by the Plaintiff as a result of the $55,000 loan from the Washington State Employees Credit Union.
II
The Court initially must determine whether the original transfer from the Trust to the Plaintiff was valid so as to convey title to the Property. The Plaintiff contends that because the Trust Deed designated both the grantor and grantee as Darvid R. Seastrom, rather than Darvid E. Seastrom, the Plaintiff was never conveyed an interest in the Property. Plaintiff's argument is not persuasive. RCW 64.04.020 requires that every deed be in writing, signed by the party bound thereby, and acknowledged by the party before an authorized person. Cases hold that despite a misnomer of a party in a deed, title passes from the actual grantor to the actual grantee when evidence is presented satisfying the court of the error in the names. See Mid-Am. Nat'l Bank & Trust Co. v. Gymnastics Int'l, Inc., 6 Ohio App.3d 11, 12-13, 451 N.E.2d 1243, 1245 (1982); Webster-Art & Strength Bldg. & Loan Ass'n v. Armondo, 27 Backes 219, 221-22, 15 A.2d 890, 892 (1940). In this case, the evidence before the Court establishes that the Plaintiff, as trustee of the Trust, had the authority to and intended to grant title to the Property to himself. Consistent with this intent, the Plaintiff signed the Trust Deed, which was acknowledged by a notary public. Consequently, the Trust Deed dated May 31, 2005, effectively granted title of the Property to the Plaintiff.
On its face, the Gift Deed from the Plaintiff conveys to Ms. Seastrom as a "gift" the Property together with all after acquired title of the grantor. "`[W]hen construing a deed, the intent of the parties is of paramount importance.'" Kershaw Sunnyside Ranches, Inc. v. Yakima Interurban Lines, 156 Wn.2d 253, 271-72 (2006) (quoting Brown v. State, 130 Wn.2d 430, 437 (1996)). Even absent ambiguity, Washington State courts have "consistently examined the circumstances surrounding the transfer and subsequent conduct of the parties .. . if helpful in ascertaining the parties' intent . . . ." Kershaw Sunnyside Ranches, Inc., 156 Wn.2d at 272 n.15. This is consistent with the "context rule," under which extrinsic evidence is admissible, regardless of whether the contract language is deemed ambiguous, to assist the court in ascertaining the parties' intent and in interpreting the contract. Spectrum Glass Co., Inc. v. Pub. Utility Dist. No. 1 of Snohomish County, 129 Wn. App. 303, 310-11 (2005). The court may consider: "(1) the subject matter and objective of the contract, (2) the circumstances surrounding the making of the contract, (3) the subsequent conduct of the parties to the contract, (4) the reasonableness of the parties' respective interpretations, (5) statements made by the parties in preliminary negotiations, (6) usages of trade, and (7) the course of dealing between the parties." Spectrum Glass Co., Inc., 129 Wn. App. at 311 (citing Berg v. Hudesman, 115 Wn.2d 657, 666-68 (1990)).
The Plaintiff contends that consistent with the extrinsic evidence, the Plaintiff intended to retain an interest in the Property so that he could live there for the remainder of his life. To support his contention, the Plaintiff points to the Power of Attorney given to Ms. Seastrom on the same day as the Gift Deed, which includes as other terms, "Right of Survi[v]orship." While this evidence appears to establish the Plaintiff's intent to retain some interest in the Property, "`[e]xtrinsic evidence is to be used to illuminate what was written, not what was intended to be written.'" Spectrum Glass Co., Inc., 129 Wn. App. at 311 (quoting Hollis v. Garwall, Inc., 137 Wn.2d 683, 697 (1999)). Thus, the Gift Deed plainly conveys a fee simple interest in the Property to Ms. Seastrom.
The Plaintiff seeks to avoid his transfer of the Property to Ms. Seastrom under 11 U.S.C. § 548(a)(1)(B)(ii)(I) and (III), which allows avoidance of a transfer of an interest of the debtor in property made within two years before a debtor's bankruptcy filing. Under subsection (B)(ii)(I), the Plaintiff is required to prove that he was insolvent on the date of the transfer, November 17, 2005, or became insolvent as a result of the transfer. There is limited evidence before the Court regarding the Plaintiff's financial situation at the time of the transfer. This evidence indicates that when he transferred the Property, the Plaintiff had spent almost all of his inheritance. Even so, the Plaintiff owned, and still owns, ten acres of property...
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